Rising European shares, bolstered by Italian banks, led to global shares to edge upwards on Monday. This upswing comes following a period of global market caution, in which the yen, widely regard as a safe-haven currency, rose to a 17-month peak against the U.S. dollar. In addition, the recent risk-averse environment plummeted German bond yields to its low on the year. However, Monday saw major indices from Germany, France, Britain, and Europe as a whole increase with Germany’s DAX index leading the way with a 1.3% climb. Meanwhile, stock futures in the U.S. were projecting roughly a 0.4% increase for U.S. shares throughout the trading day.
Early on Monday, investors were seemingly on pace to maintain the recent trend of treading with extreme caution. This short-lived phenomenon was due in part to the IMF spring meetings being scheduled for later this week in Washington D.C. ,in which finance officials from the G20 will hold assembly. The IMF meeting coupled with the beginning of the U.S. first-quarter earnings season led to major indices from Europe seeing temporary losses of 1%, the yen climbing against the dollar to levels not seen in a year and a half, and German bond yields tumbling to its yearly low. The yen’s movement against the dollar Monday caused the Japanese government to alert the world that it may take action in order to weaken its nation’s currency. The yen’s strength and pessimistic economic data led to major Japanese indices edging lower on the day.
However, Italian bank stocks surged later Monday and helped ease all of the former problems seen earlier in the day. The bank shares climbed ahead of a gathering in Rome between Italy’s largest banks, the central bank, and the Treasury in which they will attempt to create a rescue fund. The surge amongst these shares initially lifted local indices, then European indices, and then finally indices across the globe. Analysts from UBS shared their view regarding the forthcoming Italian meeting, “Reports of a possible system-wide fund announcement this week are promising but we remain cautious until details are announced.” One unnamed trader spoke with regards to the coming meeting’s potential impact on the broader market, “(We’re) not particularly excited about this even if it is clearly a positive step …. This news flow will help a bear market rally on the sector that might be sharp.”
The Italian banking index was most recently up nearly 5% on the day, adding to the 13% gains it has experienced since reaching a three-year low last week. Yet, the index has decreased by over 30% on the year, compared to the European market being down 9% in 2016. Shares in Europe have struggled and closed with losses for the previous four weeks, and if they end this week down, it will mark their worst streak in nearly three years.